(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes R No
£

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.4.05 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes R No
£

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £

Accelerated filer £

Non-accelerated filer £

Smaller reporting company R

(Do not check if a smaller reporting company)

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £
No R

As of September 8, 2014,
there were 6,664,093 shares of the Registrant’s common stock outstanding.

Amortization of capitalized software development costs and license fees

9,654

2,952

Impairment losses

194

175

Provision for excess inventory

561

417

Change in fair value of warrant liability

-

(17

)

Gain on extinguishment of liabilities

(1,159

)

-

Changes in operating assets and liabilities:

Due from factor

705

12,368

Accounts and other receivables

878

3,280

Inventory

2,678

4,983

Capitalized software development costs and license fees

(4,125

)

(6,903

)

Advance payments for inventory

1,052

(601

)

Prepaid expenses and other assets

2,557

1,036

Accounts payable and accrued expenses

(1,505

)

(6,759

)

Advances from customers and deferred revenue

(6,827

)

(4,402

)

Net cash (used in) provided by operating activities

(115

)

1,081

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(331

)

(243

)

Advances to GMS Entertainment Limited

(230

)

-

Net cash used in investing activities

(561

)

(243

)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of inventory financing

(1,764

)

-

Income tax withholding from stock compensation

(7

)

-

Net cash used in financing activities

(1,771

)

-

Effect of exchange rates on cash and cash equivalents

(1

)

(46

)

Net (decrease) increase in cash and cash equivalents

(2,448

)

792

Cash and cash equivalents — beginning of period

13,385

18,038

Cash and cash equivalents — end of period

$

10,937

$

18,830

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the period for interest and financing costs

$

300

$

345

Cash paid during the period for income taxes

$

-

$

-

See accompanying notes to condensed consolidated
financial statements

6

MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(Unaudited, dollars in thousands, except
per-share amounts)

1. PRINCIPAL BUSINESS ACTIVITY AND BASIS
OF PRESENTATION

The accompanying financial
statements present the financial results of Majesco Entertainment Company and Majesco Europe Limited, its wholly-owned subsidiary,
(“Majesco” or the “Company”) on a consolidated basis.

The Company is a provider
of video game products primarily for the mass-market consumer. It sells its products primarily to large retail chains, specialty
retail stores, and distributors. It publishes video games for major current generation interactive entertainment hardware platforms,
including Nintendo’s DS, 3DS, Wii and WiiU, Sony’s PlayStation 3, or PS3, and PlayStation Portable, or PSP®,
Microsoft’s Xbox 360 and Xbox One and the personal computer, or PC. It also publishes games for digital platforms, including
mobile platforms like the iPhone, iPad and Android devices, as well as online sites such as Facebook and Steam.

The Company’s
video game titles are targeted at various demographics at a range of price points. Due to the larger budget requirements for developing
and marketing premium console titles for core gamers, it focuses on publishing more casual games targeting mass-market consumers.
In some instances, its titles are based on licenses of well-known properties and, in other cases, based on original properties.
The Company enters into agreements with content providers and video game development studios for the creation of its video games.

The Company’s
operations involve similar products and customers worldwide. These products are developed and sold domestically and internationally.
The Company may also enter into agreements with licensees, particularly for sales of its products internationally. The Company
is centrally managed and its chief operating decision makers, the chief executive and other officers, use consolidated and other
financial information supplemented by sales information by product category, major product title and platform for making operational
decisions and assessing financial performance. Accordingly, the Company operates in a single reportable segment. In fiscal 2013,
the Company acquired an interest in GMS Entertainment Limited, which is focused on the development and operation of real money
online games, social casinos and lottery systems.

Geographic regions.
Net revenues by geographic region were as follows:

Three months ended July 31,

Nine months ended July 31,

2014

%

2013

%

2014

%

2013

%

United States

$

2,654

91

$

3,562

89

$

24,768

88

$

29,155

78

Europe

257

9

436

11

3,317

12

8,035

22

Total net revenues

$

2,911

100

$

3,998

100

$

28,085

100

$

37,190

100

The accompanying interim
condensed consolidated financial statements of the Company are unaudited, but in the opinion of management, reflect all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim period. Accordingly,
they do not include all information and notes required by generally accepted accounting principles for complete financial statements.
The Company’s financial results are impacted by the seasonality of the retail selling season and the timing of the release
of new titles. The results of operations for interim periods are not necessarily indicative of results to be expected for the entire
fiscal year. The balance sheet at October 31, 2013 has been derived from the audited financial statements at that date but does
not include all of the information and footnotes required by accounting principles generally accepted in the United States of America
for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with
the Company’s consolidated financial statements and notes thereto for the year ended October 31, 2013 filed with the Securities
and Exchange Commission on Form 10-K on January 14, 2014.

Reverse Stock Split.
In 2013, the Company received a notification letter from NASDAQ notifying it that it was not in compliance with its $1.00 minimum
bid price requirement because the bid price for the Company’s common stock closed below $1.00 over the prior 30 consecutive
business days. To regain compliance with this requirement, we completed a reverse stock split, which was effected on June 13, 2014
at a ratio of one-for-seven with no change in par value. All share information presented in this Quarterly Report on Form 10-Q
gives effect to the reverse stock split.

Going Concern Basis.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company
has suffered losses that raise substantial doubt about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty. As of July 31, 2014, management believes that
there may not be sufficient capital resources from operations and existing financing arrangements in order to meet operating expenses
and working capital requirements for the next twelve months. Accordingly, the Company is evaluating various alternatives, including
reducing operating expenses and personnel costs, securing additional financing for future business activities and other strategic
alternatives including a sale or merger of the Company. There can be no assurance that the Company will be able to generate the
level of operating revenues in its business plan, or if additional sources of financing will be available on acceptable terms,
if at all. If no additional sources of financing are available, it could have a material effect on future operating prospects.

7

2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Principles of Consolidation. The
accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary located in the
United Kingdom. Significant intercompany accounts and transactions have been eliminated in consolidation. The Company has 50% of
the voting control of GMS Entertainment Limited (“GMS”) and the right to appoint one-half of the directors of GMS.
All business activities and transactions that significantly impact GMS must be approved by both equity owners. Accordingly, the
Company accounts for GMS on the equity method as a corporate joint venture.

Revenue Recognition.
The Company recognizes revenue upon the shipment of its products when: (1) title and the risks and rewards of ownership are
transferred; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4)
the collection of related accounts receivable is probable. Certain products are sold to customers with a street date (the earliest
date these products may be resold by retailers). Revenue for sales of these products is not recognized prior to their street date.
Some of the Company’s software products provide limited online features at no additional cost to the consumer. Generally,
such features have been considered to be incidental to the Company’s overall product offerings and an inconsequential deliverable.
Accordingly, the Company does not defer any revenue related to products containing these limited online features. However, in instances
where online features or additional functionality is considered a substantive deliverable in addition to the software product,
such characteristics will be taken into account when applying the Company’s revenue recognition policy.

The Company generally
sells its products on a no-return basis, although in certain instances, the Company provides price protection or other allowances
on certain unsold products. Price protection, when granted and applicable, allows customers a partial credit against amounts they
owe the Company with respect to merchandise unsold by them. Revenue is recognized, and accounts receivable is presented, net of
estimates of these allowances.

The Company estimates
potential future product price protection and other allowances related to current period product revenue. The Company analyzes
historical experience, current sell through of retailer inventory of the Company’s products, current trends in the video
game market, the overall economy, changes in customer demand and acceptance of the Company’s products and other related factors
when evaluating the adequacy of price protection and other allowances.

Sales incentives or
other consideration given by the Company to customers that are considered adjustments of the selling price of its products, such
as rebates and product placement fees, are reflected as reductions of revenue. Sales incentives and other consideration that represent
costs incurred by the Company for benefits received, such as the appearance of the Company’s products in a customer’s
national circular ad, are reflected as selling and marketing expenses, in accordance with Accounting Standards Codification (“ASC”)
605-50, Customer Payments and Incentives.

In addition, some of
the Company’s software products are sold exclusively as downloads of digital content for which the consumer takes possession
of the digital content for a fee. Revenue from product downloads is generally recognized when the download is made available (assuming
all other recognition criteria are met).

When the Company operates
hosted online games in which players can play for free and purchase virtual goods for use in the games, it recognizes revenues
from the sale of virtual goods as service revenues over the estimated period in which players use the game. It currently estimates
these periods of use to be three to four months. The Company periodically assesses its estimates for this period of use and future
increases or decreases in these estimates and adjusts recognized revenues prospectively. The Company also recognizes advertising
revenue as ads are served. The Company has not earned significant revenue to date related to its online games.

The
Company records revenue for distribution agreements where it is acting as an agent as defined by ASC Topic 605, Revenue Recognition,
Subtopic 45, Principal Agent Considerations, on a net basis. When the Company enters into license or distribution agreements
that provide for multiple copies of games in exchange for guaranteed amounts, revenue is recognized in accordance with the terms
of the agreements, generally upon delivery of a master copy, assuming our performance obligations are complete and all other
recognition criteria are met, or as per-copy royalties are earned on sales of games.

In certain instances,
customers and distributors provide the Company with cash advances on their orders. These advances are then applied against future
sales to these customers. Advances are classified as advances from customers and deferred revenue in the accompanying balance sheets.

Inventory. Inventory
is stated at the lower of cost as determined by the first-in, first-out method, or market. The Company estimates the net realizable
value of slow-moving inventory on a title-by-title basis and charges the excess of cost over net realizable value to cost of sales.
Such estimates may change and additional charges may be incurred until the related inventory items are sold.

8

Capitalized Software
Development Costs and License Fees. Software development costs include fees in the form of milestone payments made to independent
software developers and licensors. Software development costs are capitalized once technological feasibility of a product is established
and management expects such costs to be recoverable against future revenues. For products where proven game engine technology exists,
this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product basis. Amounts related
to software development that are not capitalized are charged immediately to product research and development costs. Commencing
upon a related product’s release, capitalized costs are amortized to cost of sales based upon the higher of (i) the ratio
of current revenue to total projected revenue or (ii) straight-line charges over the expected marketable life of the product.

Prepaid license fees
represent license fees to owners for the use of their intellectual property rights in the development of the Company’s products.
Minimum guaranteed royalty payments for intellectual property licenses are initially recorded as an asset (prepaid license fees)
and a current liability (accrued royalties payable) at the contractual amount upon execution of the contract or when specified
milestones or events occur and when no significant performance remains with the licensor. Licenses are expensed to cost of sales
at the higher of (i) the contractual royalty rate based on actual sales or (ii) an effective rate based upon total projected
revenue related to such license. Capitalized software development costs and prepaid license fees are classified as non-current
if they relate to titles for which the Company estimates the release date to be more than one year from the balance sheet date.

The amortization period
for capitalized software development costs and prepaid license fees is usually no longer than one year from the initial release
of the product. If actual revenues or revised forecasted revenues fall below the initial forecasted revenue for a particular license,
the charge to cost of sales may be larger than anticipated in any given quarter. The recoverability of capitalized software development
costs and prepaid license fees is evaluated quarterly based on the expected performance of the specific products to which the costs
relate. When, in management’s estimate, future cash flows will not be sufficient to recover previously capitalized costs,
the Company expenses these capitalized costs to “cost of sales-software development costs and license fees,” in the
period such a determination is made. These expenses may be incurred prior to a game’s release for games that have been developed.
If a game is cancelled prior to completion of development and never released to market, the amount is expensed to operating costs
and expenses. If the Company was required to write off licenses, due to changes in market conditions or product acceptance, its
results of operations could be materially adversely affected.

Costs of developing
online free-to-play social games, including payments to third-party developers, are expensed as research and development expenses.
Revenue from these games is largely dependent on players’ future purchasing behavior in the game and currently the Company
cannot reliably project that future net cash flows from developed games will exceed related development costs.

Prepaid license fees
and milestone payments made to the Company’s third party developers are typically considered non-refundable advances against
the total compensation they can earn based upon the sales performance of the products. Any additional royalty or other compensation
earned beyond the milestone payments is expensed to cost of sales as incurred.

Estimates. The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities or the disclosure
of gain or loss contingencies at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting periods. Among the more significant estimates included in these financial statements are price protection and customer
allowances, the valuation of inventory, the recoverability of advance payments for capitalized software development costs and intellectual
property licenses, and the valuation allowances for deferred tax benefits. Actual results could differ from those estimates.

Any loss in value of
the Company’s investment in GMS below its total carrying amount, after the application of the equity method, that is other
than a temporary decline is recognized in the period the loss in value occurs. GMS has a limited operating history and its assets
consist primarily of software and intangible assets. Key assumptions in the Company’s estimates of the fair value of GMS
include the timely completion of future license and distribution arrangements for its technology and developments in the online
gaming industry as a whole, which are subject to significant uncertainty. Accordingly, the Company’s estimates of the fair
value of GMS may change significantly in the near term.

Loss Per Share.
Basic loss per share of common stock is computed by dividing net loss applicable to common stockholders by the weighted average
number of shares of common stock outstanding for the period. Diluted (loss) per share excludes the potential impact of common stock
options, unvested shares of restricted stock and outstanding common stock purchase warrants because their effect would be anti-dilutive.

Commitments and Contingencies. We
are subject to claims and litigation in the ordinary course of our business. We record a liability for commitments and contingencies
when the amount is both probable and reasonably estimable.

9

Concentrations. The
Company develops and distributes video game software for proprietary platforms under licenses from Nintendo, Sony and Microsoft,
which must be periodically renewed. The Company’s agreements with these manufacturers also grant them certain control over
the supply and manufacturing of the Company’s products. In addition, for the three and nine months ended July 31, 2014, sales
of the Company’s Zumba Fitness games accounted for approximately 13% and 63% of net revenues, respectively, and for the three
and nine months ended July 31, 2013, sales of the Company’s Zumba Fitness games accounted for approximately 66% and 66% of
net revenues, respectively.

Recent Accounting Pronouncements.

Income Taxes.
In July 2013, the FASB issued an update to ASC 740, Income Taxes. The update to ASC 740 establishes standards for the financial
statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit
carryforward exists. The update becomes effective for the Company on November 1, 2014. Adoption of the update is not expected to
have a material impact on the Company’s financial position, results of operations, and cash flows.

Revenue. In
May 2014, the FASB issued an Accounting Standards Update creating a new Topic 606, Revenue from Contracts with Customers,
which broadly establishes new standards for the recognition of certain revenue and updates related disclosure requirements. The
update becomes effective for the Company on November 1, 2017. The Company is reviewing the potential impact of the statement on
its financial position, results of operations, and cash flows.

3. FAIR VALUE

The table below segregates
all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within
the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

Quoted prices

in active

Significant

Markets

other

Significant

for identical

observable

unobservable

Assets

inputs

inputs

July 31, 2014

(level 1)

(level 2)

(level 3)

Assets:

Money market funds

$

10,095

$

10,095

$

—

$

—

Bank deposits

842

842

—

—

Total financial assets

$

10,937

$

10,937

$

—

$

—

Investment in GMS Entertainment

$

1,705

$

-

$

—

$

1,705

In the three months ended July 31, 2014, the Company determined that a loss in the value of GMS had occurred
that was other than a temporary decline. Accordingly, the Company reduced the carrying value of its investment to its estimated
fair value. The Company estimated the fair value of GMS using estimated discounted cash flows. GMS has incurred operating losses
since its inception and future cash flows are largely dependent on the development of the market for online gaming as a whole and
GMS’s completion of license and distribution arrangements for its software and services. The significant assumptions used
by the Company in estimating GMS’s fair value include the size and type of potential agreements with licensees and distributors
and the probability and timing of completing such arrangements, the need for additional financing and future operating margins.
These assumptions are subject to significant uncertainty. The Company applied a discount rate of 35% in its analyses. GMS’s
assets consist primarily of software and intangibles. Changes in assumptions regarding the size and timing of completing new license
and distribution arrangements would significantly affect the estimate of GMS’s fair value.

Quoted prices

in active

Significant

markets

other

Significant

for identical

observable

unobservable

October 31,

assets

Inputs

inputs

2013

(level 1)

(level 2)

(level 3)

Assets:

Money market funds

$

7,283

$

7,283

$

—

$

—

Bank deposits

6,102

6,102

—

—

Total financial assets

$

13,385

$

13,385

$

—

$

—

In the nine months
ended July 31, 2013, the Company had outstanding warrants that required settlement by transferring assets under certain change
of control circumstances and were classified as liabilities in the Company’s consolidated balance sheets. The Company measured
the fair value of the warrants at each balance sheet date, using the Black-Scholes method, and recorded a gain or loss in earnings
each period as change in fair value of warrants. The warrants expired in March 2013. A summary of the changes to the Company’s
warrant liability, as measured at fair value on a recurring basis using significant unobservable inputs (Level 3), for the nine
months ended July 31, 2013 is presented below:

10

Nine months ended
July 31

2013

Beginning balance

$

17

Total (gain) included in net loss

(17

)

Ending balance

$

-

Assumptions used to
determine the fair value of the warrants in the nine months ended July 31, 2013 were:

Nine months ended July 31

2013

Estimated fair value of stock

$0.61-$1.00

Expected warrant term

0.0-0.3 years

Risk-free rate

0.0-0.1%

Expected volatility

77.4-84.8%

Dividend yield

0%

The carrying value
of accounts receivable, accounts payable and accrued expenses, due from factor, and advances from customers are reasonable estimates
of their fair values because of their short-term maturity.

4. DUE FROM FACTOR AND CUSTOMER CREDITS,
NET

Due from factor and
customer credits, net, consists of the following:

July 31, 2014

October 31, 2013

Outstanding accounts receivable sold to factor

$

3,019

$

9,131

Less: customer allowances

(2,593

)

(3,319

)

Less: provision for price protection

(1,904

)

(1,943

)

Less: advances from factor

-

(1,735

)

(Customer credits)/Due from Factor

$

(1,478

)

$

2,134

Outstanding accounts
receivable sold to the factor as of July 31, 2014 and October 31, 2013 for which the Company retained credit risk amounted to
$7 and $260, respectively. As of July 31, 2014 and October 31, 2013, there were no allowances for uncollectible accounts. Allowances
include provisions for customer payments and incentives deductible in future periods. As of July 31, 2014, customer allowances
and provisions for price protection exceeded outstanding accounts receivable sold to the Company’s factor. The excess is
classified as a liability in the accompanying balance sheet.

5. ACCOUNTS AND OTHER RECEIVABLES, NET

Accounts and other
receivables, net, consist of the following:

July
31,

2014

October
31,

2013

Royalties receivable

$

-

$

702

Trade accounts receivable, net of allowances of $0

291

467

Total accounts and other receivables, net

$

291

$

1,169

6. INVENTORIES

Inventories consist of
the following:

July
31,

2014

October
31,

2013

Finished goods

$

1,537

$

3,969

Packaging and components

83

890

Total inventories

$

1,620

$

4,859

11

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other
current assets consist of the following:

July
31,

2014

October
31,

2013

Deferred cost of sales

$

-

$

1,748

Prepaid advertising

-

994

Other

340

85

Total prepaid expenses and other current assets

$

340

$

2,827

8. PROPERTY AND EQUIPMENT, NET

Property and equipment,
net, consist of the following:

July
31,

2014

October
31,

2013

Computers and software

$

1,384

$

3,430

Furniture and equipment

1,520

1,554

Leasehold improvements

150

154

Total property and equipment, gross

3,054

5,138

Accumulated depreciation

(2,404

)

(4,321

)

Total property and equipment, net

$

650

$

817

In the three and nine
months ended July 31, 2014, the Company designated certain fully-depreciated assets with no fair value as held for disposal with
adjustments to reported costs and accumulated depreciation for in-service assets of $2,210.

9. INVESTMENT IN GMS ENTERTAINMENT LIMITED

In the fiscal year
ended October 31, 2013, the Company formed GMS, an Isle of Man company, with a third party to pursue online casino gaming. The
Company accounts for GMS on the equity method as a corporate joint venture.

In the three and nine
months ended July 31, 2014, the Company’s share of GMS’s net loss was $176 and $588, respectively, which is included
in loss from equity method investment in the statement of operations. GMS’s fiscal year end is September 30, which differs
from the Company’s fiscal year end by one month. The Company’s policy is to record its share of GMS’s periodic
results on the basis of a one-month delay. In addition, In the three and nine months ended July 31, 2014, the Company recognized
foreign currency translation gains of $8 and $112, respectively, which is included in foreign currency translation adjustments
in other comprehensive loss. The functional currency of GMS is the pound sterling.

In the three and nine
months ended July 31, 2014, the Company made cash advances to GMS totaling $230. Subsequent to July 31, 2014, the Company made
additional cash advances to GMS totaling $180.

In the three months
ended July 31, 2014, the Company determined that a loss in the value of GMS had occurred that was other than a temporary decline.
Accordingly, the Company reduced the carrying value of its investment to its estimated fair value and recognized a loss of $1,319,
which is included in loss from equity method investment.

As of June 30, 2014,
the assets of GMS consisted of approximately $300 of cash and other working capital and $2,300 of intangible assets and goodwill.
As of July 31, 2014, the carrying amount of the Company’s investment in GMS exceeds its share of GMS’s recorded net
assets by $431.

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
AND DUE TO DISTRIBUTION PARTNERS

Accounts payable and
accrued expenses consist of the following:

July 31, 2014

October 31, 2013

Accounts payable-trade

$

1,341

$

4,436

Royalties, fees and development

1,997

3,612

Salaries and other compensation

788

742

Other accruals

223

204

Total accounts payable and accrued expenses

$

4,349

$

8,994

During the three and
nine months ended July 31, 2014, the Company recognized a gain on extinguishment of liabilities of $1,159. The Company determined
that certain accounts payable balances and claims for license fees and services would never be paid because they were no longer
being pursued for payment and had passed the statute of limitations as of July 31, 2014.

Salaries and other
compensation includes accrued payroll expense, accrued incentive compensation and employer 401K plan contributions. The Company
believes that the operation of its 401k plan may not be in compliance with certain plan provisions. The Company is currently assessing
what corrective actions may be needed to be taken to bring the plan back into compliance. The Company cannot currently estimate
the cost of correcting any plan deficiencies, including additional plan contributions, if required.

Due to distribution
partners as of July 31, 2014 includes $1,981 due to a publisher for games distributed by the Company as an agent.

12

11. ADVANCES FROM CUSTOMERS AND DEFERRED
REVENUE

Advances from customers
and deferred revenue consist of the following:

July
31,

2014

October
31,

2013

Deferred revenue

$

-

$

5,204

Deferred license revenue

-

1,179

Advances from customers

11

455

Total advances from customers and deferred revenue

$

11

$

6,838

12. STOCKHOLDERS’ EQUITY

Common stock warrants

In the nine months ended
July 31, 2014, there were no changes in the Company’s outstanding warrants. As of July 31, 2014, the Company had warrants
for 7,143 shares outstanding with an exercise price of $7.42 per share, which expire in March 2015.

13. STOCK BASED COMPENSATION ARRANGEMENTS

Stock-based compensation
expense in the three and nine months ended July 31, 2014 amounted to $285 and $928, respectively. Stock-based compensation expense
in the three and nine months ended July 31, 2013 amounted to $352 and $1,017, respectively. Stock-based compensation expense is
recorded in general and administrative expenses in the accompanying consolidated statements of operations.

A summary of the Company’s
stock option activity in the nine months ended July 31, 2014 is presented below:

Outstanding at beginning of period

480,526

Granted

-

Exercised

-

Forfeited

(26,494

)

Expired

(48,084

)

Outstanding at end of period

405,948

As of July 31, 2014,
the weighted-average exercise price of outstanding options was $6.66 per share.

A summary of the Company’s
restricted stock activity in the nine months ended July 31, 2014 is presented below:

Outstanding at beginning of period

228,737

Granted

39,776

Vested

(30,464

)

Canceled

(9,975

)

Outstanding at end of period

228,074

The grant-date fair
value of restricted shares granted during the nine months ended July 31, 2014 was $141, based on the fair value of the Company’s
common stock on the date of grant.

In April 2014 the Company’s
stockholders and Board of Directors approved an amendment to the Plan to increase the number of common shares available for issuance
under the Plan by 3,000,000 shares.

14. INCOME TAXES

Due to the Company’s
history of losses and uncertainty of future taxable income, a valuation allowance sufficient to fully offset net operating losses
and other deferred tax assets has been established. The valuation allowance will be maintained until sufficient positive evidence
exists to support a conclusion that a valuation allowance is not necessary. The Company’s effective tax rate for the three
and nine months ended July 31, 2014 and 2013 differed from the expected U.S. federal statutory rate primarily due to the change
in the valuation allowance.

15. LOSS PER SHARE

Options, warrants and
restricted shares to acquire 674,712 and 695,867 shares of common stock were not included in the calculation of diluted loss per
common share for the three and nine months ended July 31, 2014, respectively, as the effect of their inclusion would be anti-dilutive.
Options, warrants and restricted shares to acquire 514,935 and 543,209 shares of common stock were not included in the calculation
of diluted loss per common share for the three and nine months ended July 31, 2013, respectively, as the effect of their inclusion
would be anti-dilutive.

13

16. COMMITMENTS AND CONTINGENCIES

Infringement claims

On September 20, 2012,
a complaint for patent infringement was filed in the United States District Court for the Eastern District of Virginia by Intelligent
Verification Systems, LLC against Microsoft Corporation and the Company. The complaint alleges that Kinect and certain of the Company’s
Kinect games, including Zumba Fitness Rush, infringe the plaintiff’s patents relating to biometric facial recognition and
facial expression recognition technology. Intelligent Verification Systems is seeking injunctive relief and monetary damages in
an unspecified amount for the alleged infringement. The Company, in conjunction with Microsoft, is defending itself against the
claim and has certain third party indemnity rights from developers for costs incurred in the litigation. The Company cannot currently
estimate a potential range of loss if the claim against the Company is successful.

In addition to the item
above, the Company at times may be a party to claims and suits in the ordinary course of business. We record a liability when it
is both probable that a liability has been incurred and the amount of the loss or range of loss can be reasonably estimated. The
Company has not recorded a liability with respect to the matter above. While the Company believes that it has valid defenses with
respect to the legal matter pending and intends to vigorously defend the matter above, given the uncertainty surrounding litigation
and our inability to assess the likelihood of a favorable or unfavorable outcome, it is possible that the resolution of the matter
could have a material adverse effect on our consolidated financial position, cash flows or results of operations.

Commitments

The Company routinely
issues purchase orders and enters into short-term commitments in the ordinary course of business. As of July 31, 2014, commitments
under development agreements amounted to $1,373.

17. WORKFORCE REDUCTION

In January 2013, the
Company implemented a realignment of its workforce to reduce certain fixed costs and provide for a more flexible cost model in
the development and distribution of its games. The realignment included a reduction in workforce of approximately 40 employees,
including employees related to the closure of its studio in Massachusetts, which focused on social games for Facebook, game-testing
personnel in its New Jersey facility, and other marketing and support personnel.

The Company recorded
the following charges in the three and nine months ended July 31, 2013:

Three months ended July 31,

Nine months ended July 31,

Severance costs

$

-

$

766

Lease termination costs

-

10

Total workforce reduction costs

$

-

$

776

Changes in the Company’s
accrued liabilities for workforce reduction costs in the three and nine months ended July 31, 2013 were as follows:

Three months ended July 31,

Nine months ended July 31,

Beginning balance

$

301

$

-

Workforce reduction costs accrued

-

776

Workforce reduction costs paid

(283

)

(758

)

Ending balance

$

18

$

18

18. RELATED PARTIES

The Company has an agreement with Morris Sutton, the Company’s former Chief Executive Officer and
Chairman Emeritus, under which he provides services as a consultant. The agreement provides for a monthly retainer of $13. For
the three and nine months ended July 31, 2014 consulting fees incurred under the agreement amounted to $38 and $113, respectively.
For the three and nine months ended July 31, 2013, consulting fees incurred under the agreement amounted to $38 and $113, respectively.
The Company purchases a portion of its Zumba belt accessories from a supplier, on terms equal to those of another supplier. The
Company estimates that Morris Sutton and another relative of Jesse Sutton, the Company’s Chief Executive Officer, earned
compensation from such supplier of approximately $0 and $16 in the three and nine months ended July 31, 2014, respectively, and
approximately $39 and $98 in the three and nine months ended July 31, 2013, respectively, based on the value of the Company’s
purchases.

The Company has an
agreement with a Board member under which he provides specified strategic consulting services. The agreement provides for a monthly
retainer of $10. For the three and nine months ended July 31, 2014, consulting fees incurred under the agreement amounted to $30
and $90, respectively. For the three and nine months ended July 31, 2013, consulting fees incurred under the agreement amounted
to $30 and $90, respectively.

Statements in this quarterly
report on Form 10-Q that are not historical facts constitute forward-looking statements that are made pursuant to the safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These statements relate to future events
or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or
our industry’s actual results, levels of activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Those factors
include, among other things, those listed under “Risk Factors” and elsewhere in our annual report on Form 10-K for
the fiscal year ended October 31, 2013 and other filings with the Securities and Exchange Commission (“SEC”). In some
cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential” or “continue” or the negative of these terms or other comparable terminology. These statements
are only predictions. Actual events or results may differ materially. Moreover, neither we nor any other person assume responsibility
for the accuracy or completeness of these statements. We are under no duty to update any of the forward-looking statements after
the date of this report to conform these statements to actual results. References herein to “we,” “us,”
“our,” and the “Company” are to Majesco Entertainment Company.

Overview

We are a provider of
video game products primarily for the casual-game consumer. We sell our products primarily to large retail chains, specialty retail
stores, and distributors. We publish video games for major current generation interactive entertainment hardware platforms, including
Nintendo’s DS, DSi, 3DS, Wii and WiiU, Sony’s PlayStation, or PS3 and PS4, Microsoft’s Xbox 360 and Xbox One
and the personal computer, or PC. We also publish games for digital platforms such as Xbox Live Arcade and PlayStation Network,
or PSN, mobile platforms such as the iOS and Android phones, and online sites such as Facebook and Steam.

Our video game titles
are targeted at various demographics at a range of price points. Due to the larger budget requirements for developing and marketing
premium console titles for core gamers, we focus on publishing more casual games targeting casual-game consumers. In some instances,
our titles are based on licenses of well-known properties and, in other cases based on original properties. We enter into agreements
with content providers and video game development studios for the creation of our video games.

Our operations involve
similar products and customers worldwide. These products are developed and sold domestically and internationally. The Company is
centrally managed and our chief operating decision makers, the chief executive and other officers, use consolidated and other financial
information supplemented by sales information by product category, major product title and platform for making operational decisions
and assessing financial performance. Accordingly, we operate in a single segment.

Net Revenues. Our
revenues are principally derived from sales of our video games. We provide video games primarily for the mass market and casual
game player. Our revenues are recognized net of estimated provisions for price protection and other allowances.

Cost of Sales. Cost
of sales consists of product costs and amortization and impairment of software development costs and license fees. A significant
component of our cost of sales is product costs. Product costs are comprised primarily of manufacturing and packaging costs of
the disc or cartridge media, royalties to the platform manufacturer and manufacturing and packaging costs of peripherals. In cases
where we act as a distributor for other publishers’ products, cost of sales may increase as we acquire products at a higher
fixed wholesale price. While the product costs as a percentage of revenue is higher on these products, we do not incur upfront
development and licensing fees or resulting amortization of capitalized software development costs. Commencing upon the related
product’s release, capitalized software development and intellectual property license costs are amortized to cost of sales.
When, in management’s estimate, future cash flows will not be sufficient to recover previously capitalized costs, we expense
these capitalized costs to cost of sales — loss on impairment of capitalized software development costs and license
fees – future releases. These expenses may be incurred prior to a game’s release.

Gross Profit. Gross
profit is the excess of net revenues over product costs and amortization and impairment of capitalized software development and
license fees. Development and license fees incurred to produce video games are generally incurred up front and amortized to cost
of sales. The recovery of these costs and total gross profit is dependent upon achieving a certain sales volume, which varies by
title.

Product Research
and Development Expenses. Product research and development expenses relate principally to our cost of supervision
of third party video game developers, testing new products, development of social games and conducting quality assurance evaluations
during the development cycle that are not allocated to games for which technological feasibility has been established. Costs incurred
are primarily employee-related, may include equipment, and are not allocated to cost of sales.

Selling and Marketing
Expenses. Selling and marketing expenses consist of marketing and promotion expenses, including television advertising,
the cost of shipping products to customers and related employee costs. Credits to retailers for trade advertising are a component
of these expenses.

15

General and Administrative
Expenses. General and administrative expenses primarily represent employee related costs, including corporate executive
and support staff, general office expenses, professional fees and various other overhead charges. Professional fees, including
legal and accounting expenses, typically represent the second largest component of our general and administrative expenses. These
fees are partially attributable to our required activities as a publicly traded company, such as SEC filings.

Loss on Impairment
of Capitalized Software Development Costs and License Fees- CancelledGames. Loss on impairment of capitalized
software development costs and license fees — cancelled games consists of contract termination costs, and the write-off
of previously capitalized costs, for games that were cancelled prior to their release to market. We periodically review our games
in development and compare the remaining cost to complete each game to projected future net cash flows expected to be generated
from sales. In cases where we do not expect the projected future net cash flows generated from sales to be sufficient to cover
the remaining incremental cash obligation to complete the game, we cancel the game, and record a charge to operating expenses.
While we incur a current period charge on these cancellations, we believe we are limiting the overall loss on a game project that
is no longer expected to perform as originally expected due to changing market conditions or other factors. Significant management
estimates are required in making these assessments, including estimates regarding retailer and customer interest, pricing, competitive
game performance, and changing market conditions.

Loss from equity-method
investment.We have 50% of the voting control of GMS Entertainment
Limited (GMS), a developer of online and mobile real money games, social casinos and lottery systems. The Company accounts for
GMS on the equity method as a corporate joint venture. Losses in value of the Company’s investment in GMS Entertainment
Limited, after the application of the equity method, that are other than temporary are recognized as adjustments to the recorded
investment amount in the period the loss in value occurs and included in loss from equity method investment. GMS has a limited
operating history and its assets consist primarily of software and intangible assets. Key assumptions in the Company’s estimates
of the fair value of GMS include the timely completion of future license and distribution arrangements for its technology and
developments in the online gaming industry as a whole, which are subject to significant uncertainty. Accordingly, the Company’s
estimates of the fair value of GMS may change significantly in the near term.

Interest and Financing
Costs. Interest and financing costs are directly attributable to our factoring and our purchase-order financing
arrangements. Such costs include commitment fees and fees based upon the value of customer invoices factored.

Income Taxes. Income
taxes consists of our provision for income taxes, as affected by our net operating loss carryforwards. Future utilization of our
net operating loss, or NOL, carryforwards may be subject to a substantial annual limitation due to the “change in ownership”
provisions of the Internal Revenue Code. The annual limitation may result in the expiration of NOL carryforwards before utilization.
Due to our history of losses, a valuation allowance sufficient to fully offset our NOL and other deferred tax assets has been established
under current accounting pronouncements, and this valuation allowance will be maintained until sufficient positive evidence exists
to support its reversal.

Seasonality and Variations in Interim
Quarterly Results

Our quarterly net revenues,
gross profit, and operating loss are impacted significantly by the seasonality of the retail selling season, and the timing of
the release of new titles. Sales of our catalog and other products are generally higher in the first and fourth quarters of our
fiscal year (ending January 31 and October 31, respectively) due to increased retail sales during the holiday season. Sales and
gross profit as a percentage of sales also generally increase in quarters in which we release significant new titles because of
increased sales volume as retailers make purchases to stock their shelves and meet initial demand for the new release. These quarters
also benefit from the higher selling prices that we are able to achieve early in the product’s life cycle. Therefore, sales
results in any one quarter are not necessarily indicative of expected results for subsequent quarters during the fiscal year.

Critical Accounting Estimates

Our discussion and analysis
of the financial condition and results of operations is based upon our condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.

The preparation of
these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates
on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results could differ materially from these estimates under different assumptions or conditions.

We have identified
the policies below as critical to our business operations and to the understanding of our financial results. The impact and any
associated risks related to these policies on our business operations is discussed throughout management’s discussion and
analysis of financial condition and results of operations when such policies affect our reported and expected financial results.

16

Revenue Recognition. We
recognize revenue upon the shipment of our product when: (1) risks and rewards of ownership are transferred; (2) persuasive
evidence of an arrangement exists; (3) we have no continuing obligations to the customer; and (4) the collection of related
accounts receivable is probable. Certain products are sold to customers with a street date (the earliest date these products may
be resold by retailers). Revenue for sales of these products is not recognized prior to their street date. Some of our software
products provide limited online features at no additional cost to the consumer. Generally, we have considered such features to
be incidental to our overall product offerings and an inconsequential deliverable. Accordingly, we do not defer any revenue related
to products containing these limited online features. However, in instances where online features or additional functionality is
considered a substantive deliverable in addition to the software product, such characteristics will be taken into account when
applying our revenue recognition policy. To date, the Company has not earned significant revenues from such features. In addition,
some of our software products are sold exclusively as downloads of digital content for which the consumer takes possession of the
digital content for a fee. Revenue from product downloads is generally recognized when the download is made available (assuming
all other recognition criteria are met).

When
we enter into license or distribution agreements that provide for multiple copies of games in exchange for guaranteed amounts,
revenue is recognized in accordance with the terms of the agreements, generally upon delivery of a master copy, assuming
our performance obligations are complete and all other recognition criteria are met, or as per-copy royalties are earned on sales
of games.

When we operate hosted
online games in which players can play for free and purchase virtual goods for use in the games, we recognize revenues from the
sale of virtual goods as service revenues over the estimated period in which players use the game. We generally estimate these
periods of use to be less than a year. We periodically assess our estimates for this period of use and future increases or decreases
in these estimates will affect our recognized revenues prospectively. We also recognize advertising revenue related to advertising
placed on our game sites as ads are displayed.

Price Protection
and Other Allowances. We generally sell our products on a no-return basis, although in certain instances, we provide
price protection or other allowances on certain unsold products in accordance with industry practices. Price protection, when granted
and applicable, allows customers a partial credit with respect to merchandise unsold by them. Revenue is recognized net of estimates
of these allowances. Sales incentives and other consideration that represent costs incurred by us for benefits received, such as
the appearance of our products in a customer’s national circular advertisement, are generally reflected as selling and marketing
expenses. We estimate potential future product price protection and other discounts related to current period product revenue.
In addition, some of our software products are sold exclusively as downloads of digital content for which the consumer takes possession
of the digital content for a fee.

Our provisions for price
protection and other allowances fluctuate over periods as a result of a number of factors including analysis of historical experience,
current sell-through of retailer inventory of our products, current trends in the interactive entertainment market, the overall
economy, changes in customer demand and acceptance of our products and other related factors. Significant management judgments
and estimates must be made and used in connection with establishing the allowance for returns and price protection in any accounting
period. However, actual allowances granted could materially exceed our estimates as unsold products in the distribution channels
are exposed to rapid changes in consumer preferences, market conditions, technological obsolescence due to new platforms, product
updates or competing products. For example, the risk of requests for allowances may increase as consoles pass the midpoint of their
lifecycle and an increasing number of competitive products heighten pricing and competitive pressures. While management believes
it can make reliable estimates regarding these matters, these estimates are inherently subjective. Accordingly, if our estimates
change, this will result in a change in our provisions, which would impact the net revenues and/or selling and marketing expenses
we report. Fluctuations in the provisions reflected our estimates of future price protection based on the factors discussed above.
We limit our exposure to credit risk by factoring a portion of our receivables to a third party that buys without recourse. For
receivables that are not sold without recourse, we analyze our aged accounts receivables, payment history and other factors to
make a determination if collection of receivables is likely, or a provision for uncollectible accounts is necessary.

Capitalized Software
Development Costs and License Fees. Software development costs include development fees, primarily in the form of
milestone payments made to independent software developers. Software development costs are capitalized once technological feasibility
of a product is established and management expects such costs to be recoverable against future revenues. For products where proven
game engine technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product
basis. Amounts related to software development that are not capitalized are charged immediately to product research and development
costs. Commencing upon a related product’s release capitalized software development costs are amortized to cost of sales
based upon the higher of (i) the ratio of current revenue to total projected revenue or (ii) straight-line charges over
the expected marketable life of the product.

Prepaid license fees
represent license fees to holders for the use of their intellectual property rights in the development of our products. Minimum
guaranteed royalty payments for intellectual property licenses are initially recorded as an asset (capitalized license fees) and
a current liability (accrued royalties payable) at the contractual amount upon execution of the contract or when specified milestones
or events occur and when no significant performance commitment remains with the licensor. Licenses are expensed to cost of sales
at the higher of (i) the contractual royalty rate based on actual sales or (ii) an effective rate based upon total projected
revenue related to such license. Capitalized software development costs are classified as non-current if they relate to titles
for which we estimate the release date to be more than one year from the balance sheet date.

17

The amortization period
for capitalized software development costs and license fees is usually no longer than one year from the initial release of the
product. If actual revenues or revised forecasted revenues fall below the initial forecasted revenue for a particular license,
the charge to cost of sales may be larger than anticipated in any given quarter. The recoverability of capitalized software development
costs and license fees is evaluated quarterly based on the expected performance of the specific products to which the costs relate.

When, in management’s estimate, future cash flows will not be sufficient to recover previously capitalized
costs, we expense these capitalized costs to cost of sales — loss on impairment of capitalized software development
costs and license fees – future releases, in the period such a determination is made. These expenses may be incurred prior
to a game’s release. If a game is cancelled and never released to market, the amount is expensed to operating costs and expenses
– loss on impairment of capitalized software development costs and license fees – cancelled games. If we were required
to write off licenses or capitalized software development costs, due to changes in market conditions or product acceptance, our
results of operations could be materially adversely affected. As of July 31, 2014, the net carrying value of our licenses and capitalized
software development costs was $2.3 million.

License fees and milestone
payments made to our third party developers are typically considered non-refundable advances against the total compensation they
can earn based upon the sales performance of the products. Any additional royalty or other compensation earned beyond the milestone
payments is expensed to cost of sales as incurred.

We expense as research
and development costs associated with the development of mobile and social games when we cannot reliably project that future net
cash flows from developed games will exceed related development costs. These games have not earned significant revenues to date
and we are continuing to evaluate alternatives for future development and monetization.

Inventory. Inventory
is stated at the lower of cost or market. Cost is determined by the first-in, first-out method. We estimate the net realizable
value of slow-moving inventory on a title-by-title basis and charge the excess of cost over net realizable value to cost of sales.
Some of our inventory items are packaged with accessories. The purchase of these accessories involves longer lead times and minimum
purchase amounts, which may require us to maintain higher levels of inventory than for other games. Therefore, these items have
a higher risk of obsolescence, which we review periodically based on inventory and sales levels.

Accounting for Stock-Based
Compensation. Stock-based compensation expense is measured at the grant date based on the fair value of the award
and is recognized as expense over the vesting period. Determining the fair value of stock-based awards at the grant date requires
judgment, including, in the case of stock option awards, estimating expected stock volatility. In addition, judgment is also required
in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these
estimates, stock-based compensation expense and our results of operations could be materially impacted.

Other than Tempoarary
Declines in Investments. Any loss in value of the Company’s investment in GMS below its total carrying amount, after
the application of the equity method, that is other than a temporary decline is recognized in the period the loss in value occurs.
GMS has a limited operating history and its assets consist primarily of software and intangible assets. Key assumptions in the
Company’s estimates of the fair value of GMS include the timely completion of future license and distribution arrangements
for its technology and developments in the online gaming industry as a whole, which are subject to significant uncertainty. Accordingly,
the Company’s estimates of the fair value of GMS may change significantly in the near term.

Commitments and
Contingencies. We record a liability for commitments and contingencies when the amount is both probable and reasonably estimable.
We record associated legal fees as incurred.

Results of Operations

Three months ended July 31, 2014
versus three months ended July 31, 2013

Net Revenues.
Net revenues for the three months ended July 31, 2014 decreased approximately 27% to $2.9 million from $4.0 million in the
comparable quarter last year. The decrease was primarily due to lower sales of Zumba titles, including a decrease in Zumba revenue
from Europe, which was partially offset by distribution fees related to the release of Bound by Flame, a game published by a third
party in Europe and distributed by the Company in North America in the current period. Overall Zumba sales accounted for 13% of
our net revenues during the three months ended July 31, 2014, compared to 66% in the prior-year period.

The following table
sets forth our net revenues by platform:

Three months ended July 31,

Nine months ended July 31,

2014

%

2013

%

2014

%

2013

%

(thousands)

(thousands)

46%

(thousands)

(thousands)

Nintendo
Wii/WiiU

$

415

14

%

$

1,720

43

%

$

10,473

37

%

$

18,773

50

%

Microsoft Xbox 360/Xbox
One

372

13

%

945

24

%

9,834

35

%

9,077

24

%

Nintendo DS/3DS

397

14

%

605

15

%

3,702

13

%

7,353

20

%

Sony Playstation 3/4

1,068

37

%

88

2

%

1,965

7

%

564

2

%

Accessories
and other

659

22

%

640

16

%

2,111

8

%

1,423

4

%

TOTAL

$

2,911

100

%

$

3,998

100

%

$

28,085

100

%

$

37,190

100

%

18

Gross Profit. Gross
profit for the three months ended July 31, 2014 was $1.1 million compared to a gross profit of $1.2 million in the same period
last year. The decrease in gross profit reflects lower Zumba sales and certain inventory write-downs in the current period, offset
by distribution fees on the release of Bound by Flame. Gross profit as a percentage of net sales was 39% for the three months ended
July 31, 2014, compared to 31% for the three months ended July 31, 2013. The increase in gross profit as a percentage of sales
was primarily due to the portion of total revenues represented by distribution fees recognized on a net-of-costs basis, as an agent.
Such distribution fee revenue in the prior year period was not significant.

Product Research
and Development Expenses. Research and development expenses were $0.4 million for the three months ended July 31, 2014, compared
to $1.4 million of expenses for the same period in 2013. The decrease reflects the effects of workforce reductions, primarily affecting
internal development of mobile and social games, and decreased spending on other development projects.

Selling and Marketing
Expenses. Total selling and marketing expenses were approximately $1.0 million for the three months ended July 31, 2014, compared
to $1.0 million for the three months ended July 31, 2013. Decreases primarily due to lower personnel costs and marketing activities
related to the Company’s mobile games were largely offset by website costs impaired during the period. We had previously
capitalized costs related to a web site intended for the sale of online games. During the quarter ended July 31, 2014 we determined
that the cost of the web site would likely not be recovered through future cash flows and accordingly recorded a charge of $0.2
million.

General and Administrative
Expenses. For the three-month period ended July 31, 2014, general and administrative expenses amounted to $2.0 million, compared
to $2.4 million for the three months ended July 31, 2013. The decrease reflects lower compensation costs, consulting and professional
fees and related support expenses.

Operating loss.
Operating loss for the three months ended July 31, 2014 was approximately $2.3 million, compared to an operating loss of $3.6
million in the comparable period in 2013, primarily reflecting lower product development and other operating expenses.

Loss from equity
method investment. We recorded a loss of approximately $1.5 million representing a charge of $1.3 million for an estimated
loss in value of the investment that was considered to be other-than-temporary and our 50% share of losses incurred by GMS in the
period. GMS began operations in the fourth quarter of fiscal 2013. Accordingly, there was no effect of GMS operations on the prior-year
period.

Extinguishment of
liabilities. During the three months ended July 31, 2014, the Company recognized a gain on extinguishment of liabilities of
$1.2 million. The Company determined that certain accounts payable balances and claims for license fees and services would never
be paid because they were no longer being pursued for payment and had passed the statute of limitations. There was no such activity
in the prior-year period.

Income Taxes. In
the three months ended July 31, 2014 and 2013, our income tax expense was not significant, representing primarily minimum state
income taxes.

Net Revenues. Net
revenues for the nine months ended July 31, 2014 decreased approximately 24% to $28.1 million from $37.2 million in the comparable
period last year. The decrease was primarily due to lower sales of our Zumba Fitness products and lower revenues from new releases
on the Microsoft Kinect and Nintendo 3DS. The decline in Zumba sales was partially due to the timing of our newly released titles,
and a lower demand for our Zumba products for the Nintendo Wii. Our results for the nine months ended July 31, 2013 include revenues
from the launch of new Zumba titles for both the Nintendo Wii and Microsoft Kinect for the Xbox 360. Comparatively, we had no launch
revenues for Zumba in our results for the same period in fiscal 2013 as our Zumba titles were released in the previous quarter.
Additionally, sales of Zumba games for the Wii were significantly less than in the prior year overall. Software sales for all video
games for the Nintendo Wii have declined significantly, reflecting the end of life of the Wii platform. Net revenues in the European
market decreased to approximately $3.3 million from $8.0 million during the same period a year ago, also reflecting Zumba-release
timing. Overall Zumba sales accounted for 63% of our net revenues during the period, compared to 66% in the prior year.

Gross Profit. Gross
profit for the nine months ended July 31, 2014 was $4.6 million compared to a gross profit of $11.4 million in the same period
last year. The decrease in gross profit was primarily attributable to decreased net revenues for the nine months ended July 31,
2014, as discussed above. Gross profit as a percentage of net sales was 16% for the nine months ended July 31, 2014, compared to
31% for the nine months ended July 31, 2013. The decrease in gross profit as a percentage of sales primarily reflects lower average
net selling prices and higher fixed development costs and license fees in the current period as a percentage of sales. We developed
Zumba World Party for both current gen, and next gen console platforms, resulting in higher development expense relative to our
previous titles.

Product Research
and Development Expenses. Research and development expenses were $2.0 million for the nine months ended July 31, 2014, compared
to $4.9 million of expenses for the same period in 2013. Lower internal development expenses, including the effects of our January
2013 headcount reduction, were partially offset by increased third-party development costs of mobile games in the current-year
period.

19

Selling and Marketing
Expenses. Total selling and marketing expenses were approximately $6.1 million for the nine months ended July 31, 2014, comparable
to $6.2 million for the nine months ended July 31, 2013. The decrease was primarily due to decreased media advertising related
to Zumba and other new releases. Commissions and other costs were also lower due to lesser sales volumes and our January 2013 headcount
reduction. These decreases were partially offset by website costs impaired during the period.

General and Administrative
Expenses. For the nine-month period ended July 31, 2014, general and administrative expenses decreased to $5.9 million from
$6.8 million in the comparable prior-year period. The decrease primarily reflected lower compensation costs, reduced consulting
and professional fees and other administrative expenses.

Workforce Reduction.
Workforce reduction costs amounted to $0.8 million in the nine months ended July 31, 2013. There were no such costs in the current-year
period. On January 8, 2013, we implemented a realignment of our workforce to reduce certain fixed costs and provide for a more
flexible variable cost based model using outside subcontractors in the production of our games. The realignment included a reduction
in workforce of approximately 40 employees. Workforce reduction costs consisted primarily of severance costs.

Loss on Impairment
of Capitalized Software Development Costs and License Fees – Cancelled Games. For the nine-month period ended July 31,
2014, loss on impairment of capitalized software development costs and license fees – cancelled games, amounted to $0 million
compared to $0.2 million in the prior-year period. Our games in development are subject to periodic reviews to assess game design
and changing market conditions. When we do not expect the projected future net cash flows generated from sales to be sufficient
to cover the remaining incremental cash obligation to complete a game, we cancel the game, and record a charge to operating expenses
for the carrying amount of the game. In fiscal 2013, we reduced the number of console-game development projects initiated.

Operating Loss.
Operating loss for the nine months ended July 31, 2014 was approximately $9.8 million, compared to operating loss of $7.8 million
in the comparable period in 2013, primarily as a result of decreased revenues and gross profits discussed above offset by our January
2013 workforce reduction and lower development costs and impairment losses.

Change in Fair Value
of Warrant Liability. We had outstanding warrants that contained a provision that may require settlement by transferring assets
and were, therefore, recorded at fair value as liabilities. We recorded a gain of less than $0.1 million for the nine months ended
July 31, 2013, reflecting a decrease in the fair value of the warrants. The warrants expired in March 2013.

Loss from equity
method investment. We recorded a loss of approximately $1.9 million representing a charge of $1.3 million for an estimated
loss in value of the investment that was considered to be other-than-temporary and our 50% share of losses incurred by GMS in the
period. GMS began operations in the fourth quarter of fiscal 2013. Accordingly, there was no effect of GMS operations on the prior-year
period.

Extinguishment
of liabilities. During the nine months ended July 31, 2014, the Company recognized a gain on extinguishment of liabilities
of $1.2 million. The Company determined that certain accounts payable balances and claims for license fees and services would
never be paid because they were no longer being pursued for payment and had passed the statute of limitations. There was no such
activity in the prior-year period.

Income Taxes. In
the nine months ended July 31, 2014 and 2013, our income tax expense was not significant, representing primarily minimum state
income taxes.

Liquidity and Capital Resources

As of July 31, 2014,
our cash and cash equivalents balance was $10.9 million. Due to credit balances with several of our retailers that exceeded other
accounts receivable, funds available to us under our factoring agreement as of July 31, 2014 were limited. We expect continued
fluctuations in the use and availability of cash due to the seasonality of our business, timing of receivables collections and
working capital needs necessary to finance our business. Working capital as of July 31, 2014 was $7.9 million compared to $15.7
million at October 31, 2013. The Company plans to utilize a significant portion of its available capital resources to complete
the development of, or purchase inventory for the release of a number of video games between September 1 and December 1, 2014.
There can be no assurance that the Company will be able to generate the level of operating revenues in its business plan as a
result of the release of these games. If the games do not generate forcasted levels of revenue there can be no assurance that
additional sources of financing will be available on acceptable terms, if at all. If no additional sources of financing are available,
it could have a material effect on future operating prospects.

We have suffered losses
that raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. As of July 31, 2014, we believe that there may not be sufficient capital
resources from operations and existing financing arrangements in order to meet operating expenses and working capital requirements
for the next twelve months. Accordingly, we are evaluating various alternatives, including reducing operating expenses and personnel
costs, securing additional financing for future business activities, and other strategic alternatives including a sale or merger
of the Company.

20

We have retained a
financial advisor to evaluate strategic alternatives to maximize Company value. Strategic alternatives we may pursue may include,
but are not limited to, a merger, joint venture, strategic investment, asset divestitures, or similar transactions, as well as
continuing to operate the business in the ordinary course. There can be no assurance that the exploration of such strategic alternatives
will result in any transaction. The Company does not currently intend to disclose further development with respect to this process
unless and until the Board approves a specific transaction or otherwise concludes its review of strategic alternatives.

We believe that sales
of video game software for casual games operating for the Nintendo console and handheld platforms from which we have historically
derived the majority of our revenues have declined industry-wide in the past two years, partially due the introduction of competing
online and mobile platforms.. Additionally, sales of our games based on our licensing agreements with Zumba Fitness have declined
significantly. As our Zumba Fitness titles accounted for a significant portion of our revenues over the past three years, this
has contributed to the significant decline in our revenues. As a result, we have incurred reduced revenues and a net operating
loss in 2014 and expect this trend to continue in 2015.

Factoring and Purchase
Order Financing.

We factor our receivables.
Under our factoring agreement, we have the ability to take cash advances against accounts receivable and inventory of up to $30.0
million, and the availability of up to $2.0 million in letters of credit. The factor, in its sole discretion, can reduce the availability
of financing at any time. We had no outstanding advances against accounts receivable under our factoring agreement at July 31,
2014. We also utilize financing to provide funding for the manufacture of our products. Under an agreement with a finance company,
we have up to $10.0 million of availability for letters of credit and purchase order financing. In connection with these arrangements,
the finance company and the factor have a security interest in substantially all of our assets. We had no outstanding advances
for purchase order financing at July 31, 2014.

Under the terms of
our factoring agreement, we sell our accounts receivable to the factor. The factor, in its sole discretion, determines whether
or not it will accept the credit risk associated with a receivable. If the factor does not accept the credit risk on a receivable,
we may sell the accounts receivable to the factor while retaining the credit risk. In both cases we surrender all rights and control
over the receivable to the factor. However, in cases where we retain the credit risk, the amount can be charged back to us in the
case of non-payment by the customer. The factor is required to remit payments to us for the accounts receivable purchased from
us, provided the customer does not have a valid dispute related to the invoice. The amount remitted to us by the factor equals
the invoiced amount, adjusted for allowances and discounts we have provided to the customer, less factor charges of 0.45 to 0.5%
of the invoiced amount.

In addition, we may
request that the factor provide us with cash advances based on our accounts receivable and inventory. The factor may either accept
or reject our request for advances at its discretion. Generally, the factor allowed us to take advances in an amount equal to 70%
of net accounts receivable, plus 60% of our inventory balance, up to a maximum of $2.5 million of our inventory balance. Occasionally,
the factor allows us to take advances in excess of these amounts for short-term working capital needs. These excess amounts are
typically repaid within a 30-day period. At July 31, 2014, we had no excess advances outstanding.

Amounts to be paid
to us by the factor for any accounts receivable are offset by any amounts previously advanced by the factor. The interest rate
is prime plus 1.5%, annually, subject to a 5.5% floor. In certain circumstances, an additional 1.0% annually is charged for advances
against inventory.

Manufacturers require
us to present a letter of credit, or pay cash in advance, in order to manufacture the products required under a purchase order.
We utilize letters of credit either from a finance company or our factor. The finance company charges 1.5% of the purchase order
amount for each transaction for 30 days, plus administrative fees. Our factor provides purchase order financing at a cost of 0.5%
of the purchase order amount for each transaction for 30 days. Additional charges are incurred if letters of credit remain outstanding
in excess of the original time period and/or the financing company is not paid at the time the products are received. When our
liquidity position allows, we will pay cash in advance instead of utilizing purchase order financing. This results in reduced financing
and administrative fees associated with purchase order financing.

Advances from Customers.
On a case by case basis, distributors and other customers have agreed to provide us with cash advances on their orders. These
advances are then applied against future sales to these customers. In exchange for these advances, we offer these customers beneficial
pricing or other considerations.

Commitments and
Contingencies.

On September 20, 2012,
a complaint for patent infringement was filed in the United States District Court for the Eastern District of Virginia by Intelligent
Verification Systems, LLC against Microsoft Corporation and the Company. The complaint alleges that Kinect and certain Kinect games,
including Zumba Fitness Rush, infringe the plaintiff’s patents relating to biometric facial recognition and facial expression
recognition technology. Intelligent Verification Systems is seeking injunctive relief and monetary damages in an unspecified amount
for the alleged infringement. The Company intends, in conjunction with Microsoft, to defend itself against the claim. The Company
cannot currently estimate a potential range of loss if the claim against the Company is successful.

21

In addition to the
items above, we at times may be a party to claims and suits in the ordinary course of business. We record a liability when it is
both probable that a liability has been incurred and the amount of the loss or range of loss can be reasonably estimated. We have
not recorded a liability with respect to the Intelligent Verification Systems, LLC matter above. While we believe that we have
valid defenses with respect to the legal matter pending and intend to vigorously defend the matter, given the uncertainty surrounding
litigation and our inability to assess the likelihood of a favorable or unfavorable outcome, it is possible that the resolution
of the matter could have a material adverse effect on our consolidated financial position, cash flows or results of operations.

Commitments under development
agreements amounted to $1.4 million at July 31, 2014.

Off-Balance Sheet Arrangements

As of July 31, 2014,
we had no off-balance sheet arrangements.

Inflation

Our management currently
believes that inflation has not had, and does not currently have, a material impact on continuing operations.

Cash Flows

Cash and cash
equivalents were $10.9 million as of July 31, 2014 compared to $13.4 million at October 31, 2013 and $18.8 million at July
31, 2013. Working capital as of July 31, 2014 was $7.9 million compared to $15.7 million at October 31, 2013. Included in
working capital is approximately $2.0 million in sales proceeds due to distribution partners for games released in the
quarter ended July 31, 2014. Due to credit balances due to several of our retailers for past promotional allowances
and markdowns, in excess of other accounts receivable funds available to us under our factoring agreement as of July 31, 2014
were limited. In the three months ended July 31, 2014, $1.2 million of accounts payable and accrued expenses were extinguished due
to the passing of statutes of limitations pertaining to the claims. Changes in cash and working capital balances reflected
operating results, as well as significant seasonal factors. Total cash and cash equivalents, plus advances available to us
under our factoring agreement were $12.1 million and $18.2 million at July 31, 2014 and October 31, 2013, respectively.

For the nine months
ended July 31, 2014, we used approximately $0.1 million of cash in operating activities, compared to generating $1.1 million in
the same period last year. The decrease reflects a larger net loss in the current period. In addition, cash collections from sales
of the preceding periods decreased, reflecting a decline in sales to $10.1 million in the fourth fiscal quarter of 2013 from $26.6
million in the fourth quarter of fiscal 2012, while the amortization of capitalized development costs increased $6.7 million.

Investing Cash Flows.
Cash used in investing activities in the nine months ended July 31, 2014 amounted to $0.6 million, compared to $0.2 million
in the nine months ended July 31, 2013, primarily reflecting the purchase of website assets and advances to GMS.

Financing Cash Flows.
Net cash used in financing activities for the nine months ended July 31, 2014 reflected cash used to reduce outstanding borrowings
under our purchase order financing agreement for seasonal inventory. We had no outstanding borrowings at October 31, 2012 and,
accordingly, there were no net cash outflows for repayments in the nine months ended July 31, 2013.

Item 3. Quantitative and Qualitative
Disclosure about Market Risk

Not applicable.

Item 4. Controls and Procedures

Our management, with
the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures, as defined in the Securities Exchange Act of 1934 Rule 13a-15(e) and 15d-15(e), as of the end of the period
covered by this report.

In designing and evaluating
our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control objectives.

22

While we believe our
disclosure controls and procedures and our internal control over financial reporting are adequate, no system of controls can prevent
errors and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance
that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur. Controls can also be circumvented by individual acts of some people, by collusion
of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions
or deterioration in the degree of compliance with its policies or procedures. Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected.

Subject to the limitations
above, management believes that the condensed consolidated financial statements and other financial information contained in this
report, fairly present in all material respects our financial condition, results of operations, and cash flows for the periods
presented.

Based on the evaluation
of the effectiveness of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective at a reasonable
assurance level.

There were no changes
in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected,
or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

None.

Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

23

Item 6. Exhibits

3.01*

Restated Certificate of Incorporation of Majesco Entertainment Company, as amended on June 13, 2014.

31.1*

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document.

101.SCH

XBRL Schema Document.

101.CAL

XBRL Calculation Linkbase Document.

101.DEF

XBRL Definition Linkbase Document

101.LAB

XBRL Label Linkbase Document.

101.PRE

XBRL Presentation Linkbase Document.

* Filed herewith.

SIGNATURE

Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.